A report in Automotive News this week noted the extraordinary lengths to which General Motors (GM) is going to prepare and support dealers taking on the recently announced 1.6M vehicle recall. The effort includes an outreach to multiple rental car organizations, ramped up replacement part production, $500 new car discounts and extended insurance coverage.
But is it enough – and are there larger lessons for the industry as a whole to learn?
GM’s new CEO, Mary Barra, has stepped forward to accept the challenge to turn this apparent corporate baptism by fire into a turning point for the company – embracing responsibility for the ignition switch flaw. Barra’s move is reminiscent of her comment to the Fortune Magazine “Most Powerful Women Summit” last October prior to her appointment as CEO: “No more crappy cars.”
Maybe crappy cars aren’t the problem – maybe its crappy customer relationships that are at the heart of the matter. It is worth noting that GM’s recall occurs against the backdrop of Tesla’s failed attempt to maintain its existing retail presence in New Jersey (tinyurl.com/jwa5n3x - New Jersey's Tesla Smackdown Is Fair, but Dumb) in the face of legislative opposition fueled by franchise dealer angst and lobbying muscle.
For all her good intentions, Barra begins her GM tenure with a charge of $300M to the first quarter earnings report to cover the cost of the recall. And the value of having a large franchise dealer network to handle the necessary work and customer interactions could not be more obvious.
The larger issue, though, is that there is clearly a price to pay for failing to anticipate or respond to vehicle problems as early as possible. Toyota learned this to the tune of $1.2B last week. And Volkswagen, in China, felt a $480M bite last year from a 384,000-vehicle recall in that country.
The difference between GM and its two largest competitors is the presence of the OnStar system, which is now factory fit in nearly every GM vehicle (in the U.S.). With cars lasting, on average, more than 11 years, the presence of the on-board telecommunications module ought to represent a huge competitive advantage for connecting with customers and connecting customers with their dealers.
Factor in the need to reach out to original as well as second and third owners to notify them of potentially life threatening recall-related repairs to their cars and the purpose and value of that on-board connection changes considerably. GM has been operating OnStar for 17 years and yet, in that entire period of time, has never seen fit to make available to the customer a free level of service that would provide for vehicle diagnostics and safety communications TO the vehicle over an extended period of time.
But GM is not alone. Few car makers offer any kind of extended free period of vehicle connectivity.
BMW announced a move to 10 years of free service in the U.S. last year. (Back in Germany, BMW only offers three years of free service.) The 10 years of free service in the U.S. not only includes the automatic crash notification function, but also scheduled and condition-based maintenance notifications and service scheduling from the car. Hyundai, too, has opted for three years of free service.
All of this comes to my mind as I look at two recent recall letters I received for my wife’s Toyota Sienna. Both of these documents note that if the repairs related to the recalls have already been made, my wife and I will have to produce a range of relevant documents in order to be reimbursed.
This is the real reason for this blog. With cars lasting more than 11 years, car makers need to change the way they engage with their customers. The purchase of a car is usually the beginning of a long-term relationship or, if not, it is the beginning of a long voyage for the vehicle.
A vehicle with a built-in telecom module has the power to preserve a connection between the car maker and the dealer and the vehicle (if not the original customer) for a decade or more. And in the event of vehicle recalls, there is a powerful safety-related reason to maintain that connection.
Regarding the reimbursement documentation, if a related repair has been performed on the vehicle there ought to be a record stored somewhere accessible to the customer and the dealer to verify the work was performed. Requiring the customer to prove the repair was done, obviating the need for the recall work, is annoying to say the least and brand alienating for sure.
Every car maker needs to rethink its telematics strategy to better connect with customers over the long term and to make better use of diagnostics systems. The value of the customer connection is obviously in the hundreds of millions of dollars.
And keeping customers devoted to your brand is important as well. We now know – thanks to GM’s head of global quality and customer experience Alicia Boler-Davis – that a percentage point of improved customer retention is worth $700M. (http://tinyurl.com/lzc634c)
Customers are entitled to portals and apps where vehicle data and history can be accessed. Car makers should not be forcing consumers to turn to third-parties such as Carfax to discover (the sometimes partial and inaccurate) history of their vehicle.
Built-in connectivity can be used to communicate with original and second and third owners of the car. Not unlike Sirius XM, OnStar and other telematics services should be transferrable and a free basic level of service provided for – at the very least to communicate safety-related recall information in a timely manner.
It’s still not too late for GM to seize this opportunity to transform its customer relationships in a more positive direction and leverage the extraordinary advantage manifest in the OnStar service. And for the industry, the arrival of vehicle connectivity is an opportunity to eliminate crappy customer service for good.